IBM revenue declines as company shifts to higher value deals

IBM has reported a 12% decline in profits for the fourth quarter of 2014 following the sale of its System x business to Lenovo

IBM has reported a 12% decline in profits for the fourth quarter of 2014 following the sale of its System x business to Lenovo and cuts in its software operations.

Revenues from its software business were $7.6bn, down by 7% compared with the fourth quarter of 2013.

Global Services revenues decreased by 8% following the divested customer care outsourcing and System x businesses.

Revenues from IBM's Power Systems were down by 13% compared with the same period in 2013, while revenues from System z mainframe server products decreased by 26%. Systems Storage revenue decreased by 8%.

IBM chairman, president and CEO Ginni Rometty (pictured) said IBM was shifting its focus to higher value IT, including analytics, mobile and cloud services. "We are making significant progress in our transformation, continuing to shift IBM’s business to higher value, and investing and positioning ourselves for the longer term," she said.

IBM’s hardware sales are driven by organisations upgrading to the latest systems, as their applications and workloads increase.

IBM recently unveiled its latest z-series mainframe, the z13, which it claims is capable of processing 2.5 billion transactions a day.

The machine has been positioned as an alternative to using infrastructure as a service on the public cloud and hosting the back end for mobile applications. But even at an existing mainframe site, hosting more applications on the mainframe is often not economically viable.

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Among other things IBM is involved in consulting/contracting business. In this aspect, I often observe that the company values margin over expertise. Placing cheap but poorly skilled staff might have a positive effect on the revenue in the short term but long term damage is inevitable.